The Gauteng government, together with KTN Global, a unit of the UK government, has launched a plan to help reduce red tape and close funding gaps for small technology-backed businesses in the province.
As part of his economic agenda, President Cyril Ramaphosa has focused on technology as a way to get much-needed growth into the country. However, the lack of access to funding for small businesses in SA is a well documented issue. Coupled with this are the hoops that many entrepreneurs have to get through in order simply to set up an operation.
Adding to the complexity is a fragmented system in which small businesses often do not know which government departments to approach for funding, how to access markets through corporate clients, or how to grow their operations beyond simple subsistence.
KTN Global, which works with governments and corporates around the world to promote small business, has come up with a plan to help Gauteng achieve some of these goals by backing technology start-ups to tackle challenges such as unemployment and waste management.
Part of the plan is to improve networking between businesses, the government and private sector players while persuading corporates to expand their supply chains to include more small businesses.
“In having an inclusive innovation agenda, I was very keen that we work at regional level,” said Nee-Joo Teh, head of KTN Global Alliance.
“Having conversations through the last year and also through my own experience working in other countries, I really was very intrigued by the informal economy in SA. It’s almost half of the South African economy.
“I was intrigued by where innovation could play a role in unlocking the township economy,” Teh told Business Day.
KTN Global Alliance Africa is a six-year project funded by UK Aid through the Foreign, Commonwealth & Development Office. It is described as “a challenge fund designed to support the UK’s commitment to reducing poverty and achieving the [UN] Global Goals”.
In essence, the unit is working to reduce the complexity associated with starting and operating a business. For example, a waste technology company looking to recycle trash and other materials in Johannesburg would have to: register a company, hire people to collect litter, gain a permit for a recycling plant, and have an environmental assessment done for the site of that plant. All of these must be done while having to adhere to a mountain of regulations associated with the energy sector if one of the company’s end products happens to be fuel.
Many who go into business, particularly tech companies looking to solve local problems, are usually not aware of this complexity and the multitude of parties involved.
Tshimologong Precinct CEO Lesley Williams underscored the point during the launch of the Gauteng Innovation Plan, saying “we have a waste business in our ecosystem that has about 72 sites around the country but has found it hard to establish one in Johannesburg.”
Tshimologong, a start-up incubator hub affiliated with Wits University, is one of the partners on the Gauteng project and has been at the forefront of driving economic development in the province through technology. It was the site for the launch of Ramaphosa’s 4IR Commission, an initiative to find ways of growing the local economy using tech, back in 2019.
Adding to the complexity, Tseliso Mohlomi, a director at the Gauteng department of economic development, says part of the problem lies in policymakers and even corporates being unaware and unwilling to support technology start-ups, which are perceived to carry high risk.
KTN argues that if red tape can be reduced, it will go a long way to improving the prospects of the 15-million people living in the province.
All this comes at a time when tech start-ups in SA are receiving growing attention and funding from international backers.
Having done research into the SA economy, KTN found a number of challenges holding back small business in Gauteng, the hub of the SA economy. With the growth in technology adoption and business models, KTN says such businesses are especially susceptible to a fragmented system that makes it difficult to get operations off the ground.
“Efforts are being made around an SMME district ecosystem facilitation model, and trying to increase co-ordination and referrals. However, fragmentation and capability and capacity gaps remain an issue.
“The value of the ecosystem is knowing who to call, but also that we have trust and rapport. We have the ingredients but how do we bring them together,” says KTN.
With similar development projects in Nigeria and Kenya, KTN is hoping to strengthen trade relations between those countries, SA and the UK through developing small business in areas such as technology and energy.
Though it is trying to achieve the same ends in these other countries, Teh says the challenge of fragmentation was specific to SA.
Much has been said about the use of technology to push SA’s economy out of its turmoil, but it remains to be seen if reducing complexity will be enough to foster much-needed innovation or whether more deep-rooted issues should be taken care of first.
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